Leyhs Outdoor Adventures, Inc., would like begin providing life insurance coverage for its employees. Three employees are officers; each earns $100,000 per year. The other three employees each earn $40,000 per year. Ricardo, president of Leyhs come to me for advice on how to provide the coverage. He provides three alternatives, each of which will cost Leyhs $15,000 per year (an average of $2,500 per employee):

Option 1 Give each employee $2,500 to purchase coverage.

Option 2 Buy a group term life insurance policy under which each employee would be covered for an amount equal to twice her or his annual salary.

Option 3 Buy a whole life insurance policy under which each employee would receive $100,000 worth of coverage.

Evaluate this options and advise the President on the tax consequences of each. Write a letter explaining the tax effects of each option. Include recommendations of the option that provides the greatest overall tax benefits.